Relief seen in auto price war | |
http://www.sina.com.cn 2004/07/13 11:07 Shanghai Daily | |
China's auto industry may see a respite from a price war after several makers, especially of economy cars, announced they will not reduce prices of their models. The automakers said that no further price reductions will be made in their economy car models, which usually cost below 100,000 yuan (US$12,048). The companies include Chery, Changan Ford and First Automobile Works Tianjin. Analysts said that the economy cars had experienced too many price cuts in the past and they have little room to drop further. Two automakers attempted to shake up the market in the past two months when Shanghai Volkswagen and Shanghai General Motors, the biggest two automakers in China, launched massive price cuts in nearly all their models. "One important thing that the automakers have figured out is that the price cuts could not save them from a difficult time," said Yale Zhang, a CSM Asia analyst. In the first half of this year, prices of more than 20 major auto models were cut, with more price reductions made every week by car dealers. The China Association of Automobile Manufacturers also advised that companies should not depend on price cuts as a solution for the sluggish market, instead "improving the models and service should be a method for the future." Analysts said that the government's macroeconomic adjustments affected the purchase decisions by the government, private businessmen and individuals. It is estimated that plans to purchase at least 125,000 cars were slashed during the period. Meanwhile, the tighter control on car loans also deterred potential individual buyers. Last year, more than 20 percent of the buyers purchased their cars with loans while the rate dropped to 5 to 10 percent this year, according to Zhang. A recovery may occur this quarter, analysts said, adding that it still will depend on the strength of the central government's macroeconomic adjustments. Last month, car sales in China rose just 2.2 percent year-on-year to 164,852 units. The growth rate is the slowest since at least 2002. Analysts said sales may post a year-on-year decline in the next few months. In the first half of this year, China sold more than 1.12 million cars, a 29.4 percent rise from a year earlier.
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